Tax Information Exchange with Developing Countries and Tax Havens
31 Pages Posted: 4 Nov 2015
Date Written: September 30, 2015
The exchange of tax information has received ample attention recently, due to a number of recent headlines on aggressive tax planning and tax evasion. Whilst both participating tax authorities will gain when foreign investments (FDI) are bilateral, we demonstrate that FDI receiving nations will lose in asymmetric situations. We solve a bargaining model that proves that tax information exchange will only happen voluntarily with compensation for this loss. We then present empirical evidence in a global panel and find that a tax information exchange agreement (TIEA) or a double tax treaty with information exchange (DTT) is more likely when the capital importer is compensated through official development assistence (ODA). We finally demonstrate how the foreign account tax compliance act (FATCA) and similar international initiatives bias the bargaining outcome in favour of capital exporting countries.
Keywords: developing countries, tax havens, tax information exchange agreements
JEL Classification: K33, F53, H25, H87, D82
Suggested Citation: Suggested Citation